GROSS DOMESTIC PRODUCT AND ITS USES TO THE CITIZENS OF NATION

     GROSS DOMESTIC PRODUCT AND          ITS USES TO THE CITIZENS OF                            NATION         The wellbeing of t...


     GROSS DOMESTIC PRODUCT AND
        ITS USES TO THE CITIZENS OF 
                          NATION 
     


 The wellbeing of the citizens of a country is the utmost priority of the government ruling that country but when economic terms like National income,Gross domestic product,Employment etc ,are being used,most citizen tend to put a deaf ear on them. One may conclude that these terms belong go the economists and other experts who are in charge of handling  them but such understanding is greatly miscounted.
        The Economists and other experts involved in developing an economy are policy makers who develop policies to expatiate the economy. These experts depend or/and attend to the views being made by the citizens. The citizens are therefore as important as  those policy makers of the economy in question. As a result of this reality ,it becomes vital that the citizens of the country are well abreast of relevant facts about their economy .


          WHAT IS GROSS DOMESTIC                    PRODUCT(GDP)

   Gross domestic product is the total market value of all final goods and services produced within a country in a given time period without regard to the Nationality of those who produced it. According to Investopedia, GDP is calculated on annual basis and can also be done quarterly.
    This definition says much more than it appears and that is why an attempt will be made to analyze this definition in details, for a better understanding.
"Total market value"...
This refers to the price value in the market
" of all final goods and services"...
This has to do with all tangible and intangible goods that can be exchanged in the market and then made ready for consumption. GDP excludes goods and services that are not traded in the market(goods that are produced and consumed at home ). The woods sold to a conusmer  for the structure of his house is considered to be  a final goods.
      However,when these woods are sold   and to be process into paper . it is not considered as final goods but as intermediate goods.
      "Produced" ...
 GDP reckon with goods and services currently produced . It does not deal with goods produced in the past.
    "Within a country " ...
 All goods and services are produced within the borders of a country.
   "In a given period of time " ...
Within a given period,GDP carries out the usefulness of economic activities.
 According to B.O Iganiga ,an  individual who produces goods and sevices ,receives income on those goods and services and then spends the income to buy goods and services. The process is known as Economic Activity. The time period of GDP computation is usually quarters and years.
   "Without regard to nationality of those who produced it" ...
 This means that goods and services produced by foreigners are included as long as the goods and services are produced in the country. If these goods and services produced by foreigners are excluded then it is termed as "GROSS NATIONAL PRODUCT".
          The annotations given  above are the clarifications  of Nominal GDP .
     Cliffnote defines Nominal GDP as GDP evaluates at current market market prices. It is computed using "market value" of final goods and services. Nominal GDP includes both price and growth .
    Real GDP is the solution of Nominal GDP,it is pure growth. Real GDP is what Nominal GDP would have been if there were no price changes from the base year . As a result,nominal GDP is usually higher (Kimberly Amadeo).
         Nominal GDP
   Y= C + I + G + NX
C is consumer spending e.g spending on clothing,food and health care(Good sold in the market)
I is investment i.e the sum of all spending on capital equipment, inventories and structures. E.g Machinery ,unsold product and housing.
G is government expenditure e.g salaries to all government workers and naval ships.
NX is net export is the differences between export and import ( export less import) .
       
 Real GDP =  Nominal GDP/GDP deflator × 100
     GDP Deflator shows how much of the changes in the GDP from a base year is reliant on changes in the price level. When you hear the report of a country's GDP that doesn't specify the type of GDP ,its likely Nominal GDP.
         The most global economic measure of how an economy performs in the GROSS DOMESTIC PRODUCT.
 Nigeria's GDP (2007-2016)
 YEAR      GDP(billions of dollars)
2007        166.5
2008        208.1
2009        169.5
2010        369.1  
2011        411.7
2012        416
2013        515
2014        568.5
2015        481.1
2016        405.1

     GDP of Nigeria ,reaching all time high of 568.50 USD Billion in 2014 and a record low of  169.50 USD Billio n in 2009. The all time lowest GDP was in 1960 with 4.20USD Billion.
      According to Trading Economics global macro economic model and analysts expectations.,GDP is expected to be 377.00 USD Billon by the end of this quarter.


 USES OF GDP


MESURING LIVING STANDARD
Living standards vary from country to country. In most develop countries,wages are higher ,unemployment is lower,there is easy access to education and prospects are generally more favourable.
In less developed countries ,poverty is more severe ,there is less access to basic necessities of life .
In developing country like Nigeria,GDP as a standard measure of economic prosperity is particularly problematic. A quick look at Nigeria's GDP at 2015 shows decline to ten years low to 2.84% due to fall in oil price.
 Decomposing this  figure will show the comparative strengths and weakness of various sectors of the economy (Amir Bagwenje,2016). This sector-specific analysis helps to steer economic policies . It should be mention that this attempt to decipher the myth around GDP to wit; that GDP alone can represent economic prosperity to a country ,especially a developing one like Nigeria .
     Countries with higher GDP are considered more developed. The following  the top 5 countries ranked by GDP in  Africa for the year 2016.

RANK   COUNTRY   NOMINAL      NOMINAL
                                       GDP                  GDP
                                    ($ billions)      per capita
                                                                  (Us $ )
 1          Nigeria           405.1                 2,260
 2           Egypt             336.3                 3,806
 3          s. Africa         294.8                  5,018
 4          Algeria           156.1                  4,129
 5          Morocco        101.4                  3,101
                              Per the World bank(2016).

       Nigeria has the highest GDP in Africa  and the 27th country in the world with the GDP of $405.1 Billion . The analysis above shows that in 2016,Nigeria had a higher GDP than the rest of the countries . However,South Africa had a much higher GDP per capita than other African countries  on the list .
    GDP per capita is a better measure to evaluate the economic performance of a country . Therefore ,Nigeria  has the least Economic performance in the analysis above and ranked the 17th African country by its GDP per capita.  GDP per capita = GDP / population.

MEASURING ECONOMIC GROWTH
 Economies (countries) are not static- they are dynamic. The amount of goods and services the Nigeria economy could produce 50 years ago is far from what the economy can produce now.
 The expansion of an economy is dependent on international trade ,technology,population ,agriculture,population size and many other determinants.
 Economic growth is the increase in the GDP overtime . GDPgrowth= GDP**-GDP*/GDP*
  The Nigeria economy shank 0.5% year-on-year in the first quarter of 2017 ,following an upwardly revised 1.7% contraction in the previous period . The GDP annual growth rate in Nigeria is avaragely 3.95% from the year 1982 -2017 ,reaching an all time high of 19.17% in the fourth quarter of the year 2004 and a record low of -7.81 % in the fourth of  the year 1983 ( Trading Economics).


 MEASURING BUSINESS CYCLE

 The term  " Economic Recession" is one of the popular teams in the world today. In the case of Nigeria,almost all citizens have once uttered the word due to the current economic situation of the country . The term refers to the period where the economy is contracting in the short run. It is  a period of high unemployment,high inflation ,low output and low income .
      The level of real GDP is used to determine where Economies are in the business cycle . GDP increases and unemployment reduces during expansion phrases, while the reverse is the case in recession period. In the case of Nigeria,this is not so. The economy has the highest GDP in Africa and has a high rate of unemployment. One may ask the causes of economic recession in Nigeria, visit www.naij.com.
    Economies generally keep expanding in the  long run ; however,it is normal for them to experience some downturn from time to time . So as citizens ,we need to be educated on how the economy is been run on daily basis.
                                          Akam Darlington

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